Posted at 12:53 PM (CST) by & filed under General Editorial.

Dear Friends,

Ireland being downgraded by S&P is not going to heal the dollar’s problems.

Talk about the Fed increasing interest rates is another way of saying that quantitative easing (printing money) would in fact be curtailed. This cannot be possible in present circumstances or even a year from now without a market catastrophe.

The Negative PR for gold and the Green Shoots for the dollar are all raving BS to assist in the position option hedge and reversal of the Commercial for the coming vaulting of gold upwards.

How anyone can be fooled by this is a reach unless you totally throw fundamentals into the trash and live only by TA, an error that will end up taking your money away in this market.

Use TA to figure out the basic direction. The key to success is if that direction is fundamentally sustained.

This BS barrage on the dollar and gold market will not be sustained.

Respectfully yours,
Jim

Posted at 4:15 PM (CST) by & filed under In The News.

Dear CIGAs,

Check out the top twelve indicators that the economy is bad:

12. CEO’s are now playing miniature golf.
11. I got a pre-declined credit card in the mail.
10. I went to buy a toaster oven and they gave me a bank.
9. Hotwheels and Matchbox car companies are now trading higher than GM in the stock market.
8. Obama met with small businesses – GE, Pfizer, Chrysler, Citigroup and GM, to discuss the Stimulus Package.
7. McDonalds is selling the 1/4 ouncer.
6. People in Beverly Hills fired their nannies and are learning their children’s names.
5. The most highly-paid job is now jury duty.
4. People in Africa are donating money to Americans. Mothers in Ethiopia are telling their kids, “finish your plate; do you know how many kids are starving inAmerica?”
3. Motel Six won’t leave the lights on.
2. The Mafia is laying off judges.

And my most favorite indicator of all.
1. If the bank returns your check marked as “insufficient funds,” you have to call them and ask if they meant you or them.

Jim Sinclair’s Commentary

You think buyers are kicking back?

The government in financial matters has not recently asked if you want whatever you are told to buy.

Silverton to be closed by FDIC rather than sold
Lita Epstein
Jun 5th 2009 at 10:00AM

The FDIC found buyers for Atlanta’s failed bankers’ bank, Silverton, but none of Silverton’s suitors wanted to pay enough for it. After analyzing the offers, the FDIC decided it would be less costly to shut the bank down than to accept the bids received.

Bidders included the Carlyle Group with a consortium of private equity investors, including Lightyear Capital, Harvest Partners and Colony Capital. “We have to do what is least costly to our insurance fund and to shut it down for good was less costly than the bids we received,” a spokesman for the FDIC told the Financial Times.

This would not have been the first time a private investment group bought one of the failed banks. Last month, Carlyle, with three other private-equity firms, bought the banking operations of Florida’s BankUnited from federal regulators. Regulatory hurdles and restrictions do make these deals more difficult to finalize. U.S. regulators have not yet decided whether or not it’s a good idea to allow private equity groups to buy banks.

Silverton was easier to shut down because it was a bankers’ bank with about 1,400 small banks in 44 states as customers. When the FDIC took over Silverton it set up a “bridge bank” to service the other small banks and gradually assisted these small banks with setting up operations through another of the bankers’ banks. Bankers’ banks serve as the middle man between community banks and the Federal Reserve.

The failure of Silverton is expected to cost the FDIC $1.3 billion. Silverton had $3.3 billion in deposits at the time it failed and $4.1 billion in assets.

More…

Jim Sinclair’s Commentary

What is the Fed worried about? Could it be Ron Paul’s, “Edit the Fed,” bill, HR1207?

Fed Intends to Hire Lobbyist in Campaign to Buttress Its Image
By Robert Schmidt

June 5 (Bloomberg) — The Federal Reserve intends to hire a veteran lobbyist as it seeks to counter skepticism in Congress about the central bank’s growing power over the U.S. financial system, people familiar with the matter said.

Linda Robertson currently handles government, community and public affairs at Johns Hopkins University in Baltimore, and headed the Washington lobbying office of Enron Corp., the energy trading company that collapsed in 2002 after an accounting scandal. She was also an adviser to all three of the Clinton administration’s Treasury secretaries.

Robertson would help the Fed manage relations with lawmakers seeking greater oversight of a central bank that has used emergency powers to prevent Wall Street’s demise. While she wasn’t tied to Enron’s fraud, her association with the firm may raise questions, analysts said.

“Some members of Congress think there are votes in attacking the Fed” after it “unnecessarily and unwisely entangled monetary policy with fiscal policy,” said former St. Louis Fed President William Poole. “The Fed is going to have a tricky time of unwinding what has been done” and will need to “keep in touch with members of Congress more thoroughly,” said Poole, now senior fellow with the Cato Institute in Washington.

Robertson served under Treasury Secretaries Lawrence Summers, Robert Rubin and Lloyd Bentsen. She didn’t return calls seeking comment.

More…

Jim Sinclair’s Commentary

You cozy up and look at the immediate result.

Remember #1 is that Israel makes a major miscalculation.

Saudi FM to U.S.: Cut off aid if Israel doesn’t end occupation
By Haaretz Service

The United States should cut off its aid to Israel if the country does not end its occupation of Arab land, Saudi Arabia’s foreign minister told Newsweek in comments published Friday.

In response to a question on whether the U.S. should carry out the move, Prince Saud al-Faisal said: “Why not? If you give aid to someone and they indiscriminately occupy other people’s lands, you bear some responsibility.”

The interview with the foreign minister, which is for the magazine’s June 15 issue, was published a day after Obama vowed in a speech in Cairo Thursday to personally pursue a two-state solution to the Palestinian-Israeli conflict.

Faisal added: “The United States has the means to persuade the Israelis to work for a peaceful settlement. It needs to tell them that if it is going to continue to help them, they must be reasonable and make reasonable concessions.”

He went on to say that that the normalization of ties between Israel and the Arab world can only come after Israel leaves occupied land.

More…

Jim Sinclair’s Commentary

Metals always grow as currency implodes!

Russian ruble to go palladium
05.06.2009

Boris Gryzlov, the speaker of the Russian Parliament, the State Duma, said that the participants of the Economic Forum in St. Petersburg would discuss a possibility of making ruble coins from precious metals.

“We could offer the world the Russian ruble made of palladium. It would be a very strong currency. One may recollect the golden ruble, which Russia had during the tsarist times. It was a freely convertible currency and was circulating very well,” Gryzlov told reporters Thursday.

The President of the Association of Russian Banks, Garegin Tosunyan said that the coins made of precious and semi-precious metals would obviously be in demand on the market. “It has little to do with convertibility, but it would be quite normal as a measure against inflation and devaluation. Why not?” he said.

State Duma deputy Anatoly Aksakov believes that such a measure would not be effective.

“Such coins will become a numismatic rarity, a must-have for private collectors. Golden ten-ruble coins used to play a positive role in domestic and international settlements indeed, although it was the period of hyperinflation. The Russian economy should be modernized to make the ruble attractive.

More…

Jim Sinclair’s Commentary

It is getting really expensive these days to rent an army.

Let’s hope our future is not the same as Crosus’s, the renter of two Roman legions. For the historians out there, he lost his head by renting those legions.

Pakistan asks U.S. debt forgiveness
Published: June 6, 2009 at 7:33 AM

ISLAMABAD, Pakistan, June 6 (UPI) — A meeting between U.S. envoy Richard Holbrooke and Pakistani Prime Minister Yousuf Raza Gilani included a plea for debt forgiveness, officials said.

Gilani asked Holbrooke during their Friday meeting to help Islamabad’s struggle against Taliban militants by writing off $1.35 billion it owes to the United States, Pakistan’s English language newspaper Dawn reported.

Holbrooke told Gilani he would look into the matter, Minister of State for Finance and Economic Affairs Hina Khar told Dawn.

Also during the meeting, Gilani reportedly urged the White House to persuade Congress to put requests for substantial increases in military aid to Pakistan on a fast track while it battles Taliban militants in the North West Frontier Province.

Dawn said Gilani acknowledged that the United States had funneled $300 million in humanitarian aid to Islamabad in its efforts to help millions of refugees in Swat and other war-torn northwestern districts.

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Jim Sinclair’s Commentary

Here is the King of anti-Gold religionists in government.

In Britain, a desperate prime minister hangs on
Gordon Brown is burdened by ongoing economic crisis and expenses scandal
By Kevin Sullivan
updated 3:11 a.m. PT, Sun., June 7, 2009

LONDON – Two years ago, Gordon Brown entered 10 Downing Street for the first time as prime minister and promised, without a smile, to “try my utmost.”

The brainy, stone-faced Scot was the perfect tonic for a British public jaded after a decade of his flashy predecessor, Tony Blair. Within a week, Brown’s popularity ratings had soared to 77 percent.

Now a battered Brown finds himself desperately clinging to his job, facing a fed-up public, a rebellious party and, if things get much worse, the prospect of being one of the shortest-serving prime ministers in modern British history.

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Jim Sinclair’s Commentary

Gerald Celente has made accurate forecasts to a degree that if I was 180 degrees opposed to his view, I would reconsider mine.

The salient point for you is his opinion of the dollar and gold.

Here is one more resource for you.

Exclusive Interview with Future Prediction Expert Gerald Celente
by Terry Easton
06/05/2009

It’s the end of the world as the Greater Depression hits after 2010’s failed “W-recovery”

Human Events had the opportunity to interview forecaster extraordinaire Gerald Celente, President of Trends Research Institute, several days ago — and the future he predicts looks bleak indeed.  In fact, as Mr. Celente sees it, the Great Depression will seem like a mild recession as what waits for us in 2011 hits with the force of a Katrina financial hurricane.

In case you’re wondering who Mr. Celente is (if this is still possible), he’s appeared — along with his predictions — on Oprah, CNBC, Reuters, NBC, PBS, BBC, the Glenn Beck Show — the list goes on an on. His Trends Report has been successfully predicting the major future trends impacting our lives for 3 decades, including calling the dot com crash back in the 1990’s.

Mr. Celente’s forecast on our impending future is based on his study of history.  He says we are bent on destroying our currency, bankrupting our government, and unleashing a violent citizen-against-citizen eruption as the economy collapses into chaos and marshal law fascism.

Quite a claim.  And God help us if he is right — again.

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Jim Sinclair’s Commentary

The entire excuse for the short squeeze dollar rally was another imaginary Green Shoot, “the Employment Report,” that Commercials use to squeeze the dollar up. That report is FALSELY interpreted.

Temp work covers up the depth of unemployment. Adding in discouraged, part-time employees almost doubles the national rate.

Temp work helps mask joblessness among Americans
updated 12:48 p.m. ET, Sun., June 7, 2009
Associated Press Writer Frank Bass

TOWNSHEND, Vt. – For weeks, Greg Noel roamed the spine of the Green Mountains with a handheld GPS unit, walking dirt roads and chatting with people as he helped create a map of every housing unit in the United States.

Work was good: The sun was out, the snow was gone and the blackflies hadn’t begun to hatch. But now that work is over and Noel, 60, and more than 60,000 other Americans hired in April to help with the 2010 census are out of work once more.

It’s a familiar predicament in today’s economy, in which some 2 million people searching for full-time work have had to settle for less, and unemployment is much higher than the official rate when all the Americans who gave up looking for jobs are counted, too.

Because of the surge of hiring for the census, April unemployment only rose to 8.9 percent – a much slower increase than had been feared. Figures out today show unemployment now stands at 9.4 percent.

But consider these numbers:

The 9.4 percent May unemployment rate is based on 14.5 million Americans out of work. But that number doesn’t include discouraged workers, people who gave up looking for work after four weeks. Add those 792,000 people, and the unemployment rate is 9.8 percent.

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Jim Sinclair’s Commentary

“We’re one of the most secure facilities in Canada,” Christine Aquino, mint spokeswoman, said Thursday. “Doing business with the mint is still safe, and this review will likely give us some suggestions on how to improve our processes.”

Doesn’t this article say they can’t find a good amount of the gold and they think it is an inside job?

Where did they find this spokeswoman, on financial TV?

Mint looks for gold, freezes worker bonuses
BY IAN MCLEOD, OTTAWA CITIZEN
JUNE 4, 2009

OTTAWA — The Royal Canadian Mint is withholding employee bonus pay as special auditors enter a fourth month hunting for unaccounted gold that insiders say could be worth as much as several million dollars.

The Ottawa Citizen reported Wednesday that external auditors are investigating an “unreconciled difference” between the 2008 financial accounting of the mint’s precious-metals holdings and the physical stockpile of gold, silver and palladium at its Ottawa headquarters. The mystery raises possibilities from sloppy bookkeeping to a gold heist.

Stealing gold or other metals would be a considerable feat, one that would have to evade state-of-the-art security technology.

“We’re one of the most secure facilities in Canada,” Christine Aquino, mint spokeswoman, said Thursday. “Doing business with the mint is still safe, and this review will likely give us some suggestions on how to improve our processes.”

The mint has delayed asking federal Auditor General Sheila Fraser to sign off on the Crown corporation’s consolidated financial statements for 2008, as required by law, and senior government and mint officials have been secretive about the probe.

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Jim Sinclair’s Commentary

First China/Brazil and now China/Russia. The dollar rally is going to run into real problems.

The set up is perfect. The 2nd week of June is coming up with a target for the big lift off in the 3rd. $1650 is a minimum for this phase. Alf thinks an overrun could be double that $1650.

Good luck to the Goons. Their window of opportunity, if the Goons have one, is in the next 2 weeks ONLY.

Russia, China should dump dollar in trade – Medvedev
Fri Jun 5, 2009 3:07pm IST

MOSCOW (Reuters) – Russia and China should consider switching to domestic currencies in bilateral trade without going to the dollar, Russia’s president Dmitry Medvedev said in an interview with Kommersant daily published on Friday.

China has already entered similar agreements with Brazil and Belarus. The deal involves a currency swap agreement between the two countries. Trade turnover between Russia and China reached about $50 billion in 2008 and is set to increase.

“I think that we can think about such positions, for example the rouble against yuan,” Medvedev was quoted by Kommersant as saying. Russia’s own attempt to switch to the rouble in bilateral trade with Belarus has so far not been successful.

Leaders of Brazil, Russia, India and China, known by their BRIC acronym, are meeting in the Russian city of Yekaterinburg on June 16 to discuss the role of the dollar in the global financial system among other issues.

Medvedev said bilateral currency deals between trade partners ease impact of the economic crisis in an environment when many countries have difficulties tapping international capital markets.

More…

Posted at 3:18 PM (CST) by & filed under Jim's Mailbox, JSMineset Editor.

Jim,

Price and volume. The rest is statistical fluff. God bless statistical fluff.

Exactly – no volume even as the market jumps the creek. The market does not necessarily need volume to continue. I’ve seen the equity markets produce a series of false breakouts that last months before gravity overtakes the trend’s upward inertia.

The question is did we see a panic bottom? A bottom where the public rejects equity ownership? Ala 1919-1920, 1929-1932, 1973-1974, 1980-982. I suggest that the market will stair step it’s way to the ultimate panic bottom around 2012-2015.

In my opinion, what QE is trying to arrest or pause is the waterfall decline. Examples are the1932-1934 and 1974-1976 (spot-shadowed) advances. They want a 2009-2011 (spot-shadowed) advance. The trouble is, another huge C-wave advance is scheduled to begin this summer. There’s no way equities will be able to keep up.

Decisive failure of the 1967-1971 swing high suggests to me that the waterfall decline is still in play. That level was tested in March 09.

CIGA Eric

june0709-eric3june0709-eric4

Jim,

The Federal Reserve Bank of Kansas City Thomas M. Hoening had the same interpretation about the rising Treasury yield as his counterpart of the Federal Reserve Bank of San Francisco, President Janet Yellen. In his speech named “An Economy at Risk: the Tough Decisions Ahead” (attached), he said:

“The markets won´t be fooled by artificially low rates for long. Market participants realize that a period of high deficits and accommodative monetary policy are an invitation to increased pressure. I suspect we are experiencing the first signs of the markets´ concerns in the rising rates and increased volatility in long-term Treasury markets.” (p. 9)

However, I don’t expect Ben Bernanke to take any anti-inflationary actions.

Regards,
CIGA Christopher

Jim,

Dubai calls on the Rothschild bank for help, perhaps out of desperation. In Saudi Arabia a Saad Group company defaults. US, European and Asian banks are struggling. The end of Ramadan in September might mark the start of an economic depression worse than that of the 1930s.

CIGA Ken

Signs of a new financial storm for September coming from Dubai and Saudi Arabia
by Maurizio d’Orlando
Dubai calls on the Rothschild bank for help, perhaps out of desperation. In Saudi Arabia a Saad Group company defaults. US, European and Asian banks are struggling. The end of Ramadan in September might mark the start of an economic depression worse than that of the 1930s.

Milan (AsiaNews) – Rothschild’s Dubai office has been retained by Dubai’s Department of Finance for advice on the US$ 10 billion financial support fund (FSF) the emirate raised on the bond markets.

Nakheel, the property development arm of Dubai World, was the first to benefit, but is likely to be the last of its kind because funds will be handed out on the basis of two criteria: urgency and strategic importance.

More…

Dear Jim,

This is what the American dream has become thanks to the OTC paper shufflers and their complicit politicians.

Best,
CIGA BT

One in nine Americans on food stamps, USDA says
Wed Jun 3, 5:38 pm ET

WASHINGTON (Reuters) – One in nine Americans are using federal food stamps to help buy groceries as the country’s deep recession forced another 591,000 people onto the federal anti-hunger program at latest count.

Enrollment jumped 2 percent to 33.2 million people in March, the fourth consecutive month that rolls hit a record, said the Agriculture Department. The average monthly benefit was $113.87 per person.

“It’s tough out there for struggling families and will be for many months to come,” Jim Weill, president of the Food Research and Action Center, said.

More…

Jim Sinclair’s Commentary

Young Eric is going to be very famous in time. I see him as a market leader coming out of this bone grinding experience with experience and discipline.

Jim,

“This is followed by buying of equities driven by the desire to own the not-dollar similar to the equity market driven not-Weimar mark. All of this will have the algorithm goosed, driving markets into conditions without precedent.”

Agreed.

The Weimar experience has taught us that a currency panic can send stock prices to what appears to be the stratosphere. Unfortunately, rising German stock prices did not keep up with the savage currency devaluation. The German stock price to gold ratio and the impoverishment of nearly all Germans as described in the history books during the late Weimar Republic reminds us of this point.

Nevertheless, I keep my mind and options open. Panic-driven Central Bank(s) and Treasury pressing even harder on the accelerator of QE have the potential to produce an unexpected outcome. Panic-driven humans, like cornered animals, also have a tendency to do unexpected things when self-preservation is challenged.

CIGA Eric

june0709-eric1june0709-eric2

Hi Jim,

Adrian Douglas of GATA indicated a big move in June according to his analysis.

Click here to view the analysis…

However, I believe the emphasis has shifted to the August Gold contract with 260305 OI on the Futures and 66975 accumulative total Options 2:1 ratio of calls to puts.

This might suggest a big move in July (not that is matters much but it is fun to watch).

I will be monitoring the August OI and Option volume and Call/Put ratios in the coming days.

I look forward to you comments.

Thanks in advance.

Nigel

Nigel,

There is a huge gold price move coming so why chance missing it because you believe in a given time span? Gold is a simple trend line entity. The short term downtrend or bottom of the down channel are bells and if they ring, you act.

Jim

Jim,

I guess they’ll be talking about how to deliver the coup d’grace to the US Dollar.

CIGA Pedro

BRIC’s Yaketenaburg summit
2009-05-30 08:38:11

BRIC- Brazil, Russia, India and China meet to begin June 16, top leaders to attend are Prime Minister Manmohan Singh and Chinese President Hu Jintao along with the presidents of Russia and Brazil.Dr Singh will be attending both the BRIC and SCO meetings. However the ministry of external affairs refused to confirm Dr Singh’s attendance at the SCO.

All aspects of “global security” and “complexities” in the field of economy in the backdrop of the world financial meltdown will come up during the first “full-format” summit of BRIC nations, including India, Russian President Dmitri Medvedev said today.

More…

CIGA Pedro,

There has never been a better set up than what is now taking place. The commercials are operating a dollar short squeeze to open up the opportunity to run all the margined public out of their gold positions just before a major up move in the price of gold and downward spiral in the US dollar.

The odds are starting to disfavor the commercials while their fortunes rely on their ability to get the US dollar over .8200. Considering the almost universal wish by major central banks to diversify out of the USD, the commercials are going to have a major battle getting the USDX over .8200 and keeping it there.

Friday’s price action in the gold market is more a sign of desperation and necessity than it is a forbearer of ill price tidings.

Regards,
Jim

Jim,

Weimer currency event takes everything up. You (and I) have discussed that option already. Nice to see Jim Roger’s discussion’s reflecting this increasing possibility.

Armstrong’s waterfall decline scenario with specific timing dates, however, cannot be completely dismissed at this point. The waterfall decline will have little impact on gold and quality gold shares. Though, the gold stocks tend to get lumped into the equity basket during declines.

I have included the NYA Composite Index. I study volume relative to price using what I can best describe as Richard Wyckoff’s volume analysis from the 1920’s.It’s mostly studying the force of the trend using volume at swing highs and lows.

I study the NYA and exchange volume to gauge the strength of the trend for equities.

Interesting observations:

The May highs (purple arrow) in the NYA were breached on diminishing volume which implies a false breakout. While false breakouts can persist for some time, they eventually are reversed in the direction of the prevailing trend (down).

Also, the new June highs (blue arrow) continue to be probed as on decreasing energy – volume. This suggests that the upside force is waning on what is already considered a false breakout.

The above observations suggest a rising wedge formation since March 09. A failed rising wedge suggests a retest of the Nov 2008 at a minimum.

CIGA Eric

(Click chart to enlarge)

clip_image001

Dear Eric,

The most likely scenario is on the time line Armstrong has offered to us – we experience a degree of the waterfall which is offset by a panic driven Central Bank and Treasury reaction pressing even harder on the accelerator of QE.

This is followed by buying of equities driven by the desire to own the not-dollar similar to the equity market driven not-Weimar mark.

All of this will have the algorithm goosed, driving markets into conditions without precedent.

Armstrong’s 4000 Dow might not be reached. The best play is long gold. The equity side is iffy as so many variables are at play.

All the best,
Jim

Posted at 6:27 PM (CST) by & filed under In The News.

Dear CIGAs,

I made this wager when Gold was at $248, and all I got was a Forbes article because they were looking for some dumb bell then that liked gold in order to make fun of him/her. Click here to view the Forbes article… That’s a nice way to get a career article in Forbes.

Robertson is right, so we are right, as the rates he looks for come compliments of a currency event that delivers hyperinflation. He just has to be sure the other side or sides of his OTC derivative puts up margin on a daily basis or he could be 100% right and not get paid one penny.

Please don’t send 10,000 emails and faxes asking "if the interest rate goes up will that not make for a strong dollar and weak gold" because it has been answered almost every day for the past several years. No it will not because in the midst of lousy business a currency event creates hyperinflation thereby producing the rate of interest over the top.

Julian Robertson Bets the Farm on Inflation
June 04,

Simply put, Julian Robertson is the definition of a hedge fund legend. And, his success is noted by the fortune he has amassed as he now graces the Forbes’ billionaire list. He has pioneered a successful investment methodology, he has generated outstanding returns at his famous hedge fund Tiger Management, and his influence has sprouted some of the most successful modern day hedge funds in the form of the ‘Tiger Cubs.’ And, most importantly, he predicted the financial crisis two and a half years ago in an interview with Value Investor Insight. When he talks, you listen.

For those unfamiliar with Robertson, we’d highly recommend checking out the profile/biography we just wrote on him. In that piece, we have outlined exactly why you should follow him (and the Tiger Cubs for that matter too). As we detailed in his profile, Robertson has a unique investment methodology. He takes a macro approach, finds a smart idea, researches it exhaustively, and places a big bet. And, when he feels he is more than correct, he will ‘bet the farm.’ And, it looks like we have identified Robertson’s next play where he has and will continue to ‘bet the farm.’

Julian’s Big Bet

While this is not a new position for Robertson, his constant confidence behind the play has inspired us to look at it more closely. Today, we are going to highlight Julian Robertson’s steepener swap play. In layman’s terms, he is betting on inflation. Taken from eFinancialNews, "Steepeners are a type of interest rate swap, where one party agrees to pay the other a fixed rate in exchange for a floating rate, which is derived from the difference between long and short term rates. Many of these products also use high leverage, where the difference between the two rates is multiplied by up to 50 times to produce a higher return."

He thinks rates could hit 7% easily and could go as high as 18%. We agree with him on this play and we first published our very basic rationale behind shorting US Treasuries back in October of last year. The main point we’re focused on is the wager that inflation is in our future. If such an outcome came to fruition, yields on long-term Treasuries would rise. When the yields increase, bond prices will drop, thus benefiting the short position. While the vehicles noted in this article are all slightly different in construction and purpose, they all broadly wager on the same outcome: inflation. Julian’s talked about this play in numerous forms, and we actually first heard about his ‘curve steepener’ play in January 2008 in Forbes. That piece highlighted how Robertson was "long the price of two-year Treasuries and short the price of the ten-year Treasury – betting that the difference, or curve, in the yield between the two will increase." Such a play is negative on the US economy and Robertson executed it because he felt the Federal Reserve would continue to flood the economy with money. And, he has been right.

More…

Jim Sinclair’s Commentary

Vanity Fair’s article calls it a Beach Bummer.

I am sure we all feel very sorry for the OTC derivative mavens that have been thrown onto hard times. Now they will have to both winter and summer in Greenwich CT.

BEACH BUMMER
The Hamptons Stress Test
As summer begins, what better way to measure Wall Street’s health than a real-estate tour of the Hamptons? For every mansion on the sales or rental market, there’s a story—sometimes involving Bernie Madoff—and brokers are shell-shocked. The author surveys the deals, no-deals, lawsuits, divorces, and teardowns that characterize this strange, dark season.
By MICHAEL SHNAYERSONJuly 2009

clip_image001

It was the deal of the season—the deal, that is, that epitomized this dark, down, fraud-ridden year—in the once extravagant, now somber Hamptons.

John Veronis, a founding partner of Veronis Suhler Stevenson, the media-based private-equity firm that bears his name, thought he had a buyer last summer for his 10,000-square-foot oceanfront home, on Meadow Lane in Southampton’s prized estate section. Just how much he and his wife, Lauren, had been motivated to sell by the spec house going up beside them is unclear, since the Veronises declined to speak to Vanity Fair.

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Jim Sinclair’s Commentary

The new inflation alarm at the vigilant New York Federal Reserve Bank:

WV FIRE ALARM

Jim Sinclair’s Commentary

Stand firm and stay the course.

Yellen speaks of substantial shocks to come. If you assume that the algorithms were triggered and went wild today based on the green shoot demand for the dollar early on, what do you think SUBSTANTIAL SHOCKS will do to the algorithms?

Stand firm and stay the course.

Yellen Says Fed Must Brace for ‘Substantial Shocks’
By Vivien Lou Chen and Scott Lanman

June 5 (Bloomberg) — Federal Reserve Bank of San Francisco President Janet Yellen said that policy makers need to be prepared for “substantial shocks” and that rising Treasury yields may be a “disconcerting” signal of inflation fears.

“Recent experience raises the possibility that the Great Moderation is behind us, so we must be prepared for substantial shocks,” Yellen said today during a panel discussion hosted by the Fed Board of Governors in Washington. “Great Moderation” is a term used to describe the comparative economic stability seen in the U.S. and other major industrial countries, except Japan, since the mid-1980s.

Yellen’s comments on yields go beyond remarks made two days ago by Fed Chairman Ben S. Bernanke, who said in congressional testimony that the increases may reflect rising optimism about the economy and concerns about large federal deficits. Policy makers next meet June 23-24 in Washington and may consider whether to increase their planned purchases of $1.45 trillion of housing-related debt and $300 billion of long-term Treasuries.

Responding to audience questions, Yellen said that if she “had to write down a number” for the ideal long-term inflation goal, it would be 2 percent. That number is the preference of most Fed policy makers, she said, adding she would like to see more formal evaluation and research on the issue. She said she previously favored a 1.5 percent inflation rate.

“It’s a subject in which I have an open mind,” Yellen said.

Treasuries Tumbled

Treasuries tumbled today, driving two-year yields to an eight-month high, as traders began speculating the U.S. central bank will raise interest rates later this year.

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Jim Sinclair’s Commentary

This article focuses on the reality of ETF gold and silver with no bone to pick. That makes it required reading for all of us involved in the metals markets. Further, it is published by a Financial Times sponsored entity, which is another positive.

Will a ‘Silver Bullet’ Finally Kill the Metal Manipulators?
June 04,

In my previous commentary, “Silver market fundamentals DISTORTED by bullion-ETFs", I pointed out how (so-called) “bullion-ETFs" were (with rare exceptions) merely a tool of the manipulators – with two primary purposes.

First of all, bullion-ETFs soak-up billions of investor-dollars each year, which would otherwise be invested in real bullion, or in the shares of precious metals miners. Naturally, this has helped to depress the price of silver, andseverely depress the price of silver miners – since almost all of the diverted investor-dollars were diverted from the miners, and not bullion, itself. I also showed how these fraudulent investment vehicles have been used to artificially inflate the supposed inventory-levels of silver stockpiles.

Specifically, at a time when actual silver inventories are at their lowest level in centuries, the (supposed) amount of “bullion” these funds claim to hold hassinglehandedly resulted in “official” inventory levels tripling in just three years – after plunging by 90%.

Today’s market price is based upon these phony “inventories” despite the fact that the bullion-banks who claim to hold all this silver are neversubjected to audits, to determine that they are not only holding enough silver to cover their custodial agreements with the “bullion-ETFs" – but are alsoholding sufficient silver to cover the MUCH larger “short” positions of these Manipulators (see “Silver Manipulation the worst in history – Ted Butler”).

Unless and until there is such a full and complete audit, the only rational assumption for investors is this supposed “tripling”of inventories is totally illusory, which also means that the “bullion” that is claimed to be held by these bullion-ETFs is also illusory.

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Jim Sinclair’s Commentary

The question is timing.

Yes, it is possible for equities to perform like that in currency event driven hyperinflation.

What a delightful event to see the illegal (not legal – for them we have respect) goons ground into their own dirt, filth and fowl existences.

What do you think such an event would mean to gold equities as they follow the gold price, and get no opposition?

Jim Rogers On CNBC- I Have No Shorts
June 5, 2009

For the majority of his career, Jim Rogers has had both long and short positions. As of this interview, this is one of the few times Jim Rogers does not have a short position. Among the reasons for Jim not having any shorts is a possible currency crisis and thus should avoid shorting the market. The last time Jim had no shorts was the market crash of 1987. Among other things Jim Rogers continues to be “wildly” bullish on China, “wildly” bullish on commodities. Specifically, Jim likes Silver over Gold, Natural Gas and Cotton.

“I’m afraid they’re printing so much money that stocks could go to 20,000 or 30,000″ -Jim Rogers

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– May Jobs Loss Was About 538,000 Net of Biases versus 345,000 Official Decline
– Birth-Death Model Upside Bias Increased by 27%
– Annual Payroll Decline Deepened to 4.0% / SGS-Alternate Unemployment at 20.5%

From the following subscription service you should subscribe to:

http://www.shadowstats.com

Jim Sinclair’s Commentary

Extremely well said.

No country has ever abolished poverty by printing paper
by Egon von Greyerz
June 4, 2009

We have consistently warned investors that the USA and many other countries including the UK will have a hyperinflationary depression in coming years.  In this Newsletter we discuss why hyperinflation will happen. We also look at why government debt will grow exponentially in the next few years and discuss who is going to repay the additional $30-50 trillion that the world is likely to print since this crisis started?

Hyperinflationary Scenario Confirmed

We are primarily discussing the USA in this Newsletter, but most of the discussion also applies to the UK and many more countries.

Our three most important indicators are now confirming that the hyperinflationary avalanche is set in motion. The three indicators are: US Dollar US, Treasury Bonds,  and Gold.  In our January 5, 2009 Newsletter we stated “the big surprise in the coming year will be long rates going up and bond markets falling rapidly”. We also said:  “We expect the dollar fall to accelerate during  2009 against most currencies”. And finally we said back in January that gold is our favourite investment for 2009. So it should be no surprise to our readers that the US Treasury 30 year bond is falling rapidly (interest rates going up),  that the US dollar has resumed its down trend and that gold is on its way to new highs.

The three indicators – US Dollar,T Bonds,  and gold are all variations on a theme. The theme is clear, namely that the USA is on its way to bankruptcy and that the rest of the world is no longer prepared to finance pieces of paper that have no value and can only be repaid by printing more of the same worthless paper. As George Bernard Shaw said:

“YOU HAVE TO CHOOSE BETWEEN TRUSTING THE NATURAL STABILITY OF GOLD AND THE NATURAL STABILITY AND HONESTY OF THE MEMBERS OF THE GOVERNMENT. AND WITH DUE RESPECT FOR THESE GENTLEMEN, I ADVISE YOU AS LONG AS THE CAPITALIST SYSTEM LASTS, TO VOTE FOR GOLD”

We agree with Shaw – How can you trust a government that first creates the biggest financial bubble in history and then, as proof of their total idiocy, attempts to solve the problem by massively increasing the size of the bubble!

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Jim Sinclair’s Commentary

Here is today’s bullish news on the dollar so you know it is a short squeeze in La La Land.

U.S. employers cut 345,000 jobs; jobless rate jumped to 9.4 percent

WASHINGTON – With companies in no mood to hire, the unemployment rate jumped to 9.4 percent in May, the highest in more than 25 years. But the pace of layoffs eased, with employers cutting 345,000 jobs, the fewest since September.

The much smaller-than-expected reduction in payroll jobs, reported by the Labor Department on Friday, adds to evidence that the recession is loosening its hold on the country. It marked the fourth straight month that the pace of layoffs slowed.

Still, the increase in the nation’s unemployment rate from 8.9 percent in April underscores the difficulties that America’s 14.5 million unemployed are having in finding new jobs. Economists had expected the rate to hit 9.2 percent last month.

If laid-off workers who have given up looking for new jobs or have settled for part-time work are included, the unemployment rate would have been 16.4 percent in May, the highest on records dating to 1994.

Even with layoffs slowing, companies will be reluctant to hire until they feel certain that economic conditions are improving and that any recovery will last.

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Jim Sinclair’s Commentary

Another prime example of why anyone who fears IMF gold sales are also terrified of things going bump in the night.

REFILE-UPDATE 1-China ready to buy up to $50 bn IMF bonds-Lipsky
Fri Jun 5, 2009 6:45am EDT
(Refiles to correct title of IMF’s Lipsky in first paragraph)
(Adds background, quotes)

ST PETERSBURG, Russia, June 5 (Reuters) – China will invest up to $50 billion in new International Monetary Fund bonds, the IMF’s first deputy managing director John Lipsky told Reuters financial television on Friday.

"The Chinese authorities have indicated that … (they) would be interested in investing up to $50 billion dollars in these bonds when they are ready and we hope that other countries will follow suit," Lipsky said on the sidelines of the St Petersburg Economic Forum.

Russia has already said it is interested in buying up to $10 billion of the bonds, which will form part of the extra $500 billion in capital the IMF is seeking to raise to help it support countries through the worst global economic slowdown since the great depression [ID:nL5330603].

China is the world’s biggest holder of gold and forex reserves, followed by Japan and Russia.

Lipsky said proposals for the bond issuance will soon be submitted to the IMF’s executive board, which should also receive the proposals for the issue of new Special Drawing Rights (SDRs) next month.

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Jim Sinclair’s Commentary

Who out there is so naive as to think that these banks actually made all those billions trading in the first quarter?

That was the end of the mark to market rule followed by upward revaluation of the toxic asset portfolios booked as trading profits.

Destroyers and Paper Shufflers are all that is out there.

The street knows it, financial TV knows it, the dancing clown knows it and they all love it. You see how foul, amoral and soul-less these demons are.

They are so bad they are not even welcomed by King Ravana in Lanka.

Bank Profits From Accounting Rules Masking Looming Loan Losses
6-05-09
By Yalman Onaran

June 5 (Bloomberg) — Big banks in the U.S. say they’re on the mend. The five largest were profitable in the first quarter, rebounding from record losses for the industry in the fourth quarter. Share prices have jumped, with the KBW Bank Index doubling since March 6.

Treasury Secretary Timothy Geithner, after “stress testing” 19 banks on their ability to withstand a worsening economy, declared in early May that Americans can be confident in the banks’ stability and resilience. Wells Fargo & Co. and Morgan Stanley were among banks raising $43 billion in new capital since then through share sales.

“With our capital and assets, stressed as they have been, we can go back to focusing all our attention on managing our business and restoring value,” Citigroup Inc. Chief Executive Officer Vikram Pandit said after Geithner’s examinations were completed.

The revival may be short-lived. Analysts who have examined the quarterly profits and government tests say that accounting rule changes and rosy assumptions are making the institutions look healthier than they are.

The government probably wants to win time for the banks, keeping them alive as they struggle to earn their way out of the mess, says economist Joseph Stiglitz of Columbia University in New York. The danger is that weak banks will remain reluctant to lend, hobbling President Barack Obama’s efforts to pull the economy out of recession.

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Jim Sinclair’s Commentary

And now a few words by the former Chairman uttered before the sins and greed of La La Land got to him!

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. … This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process… It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard."

–Alan Greenspan in a 1967 speech

 

Jim Sinclair’s Commentary

All of these initiatives and discussions have but one agenda, and that is the death of the US dollar.

Japan’s shadow finance minister wants single Asian currency

The man who hopes to be Japan’s next finance minister envisions an Asia united by a single currency, saying the dollar may no longer reign supreme in future.

The opposition’s "shadow finance minister" Masaharu Nakagawa also says he hopes to reshape the world’s number two economy into a kinder, gentler place if his Democratic Party of Japan (DPJ) wins elections this year.

"You can’t invigorate society only through… the law of the jungle where the strong become stronger," he told AFP. "The same player would always win if there were no handicaps in golf."

Japan’s conservative Prime Minister Taro Aso must call elections by September, when the DPJ hopes to topple his Liberal Democratic Party, which has been in power for almost all of the past half century.

In an interview with AFP, Nakagawa outlined some of the changes he would like to make if he becomes finance minister in Asia’s largest economy, which is now in the throes of its worst post-World War II recession.

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Jim Sinclair’s Commentary

According to Fox News.

All pronouncements from upon high have high consequences:

Obama Overture to Hamas Suggests Inevitability of Terror Group’s Dominance Among Palestinians

In an apparent policy shift, President Obama on Thursday invited Hamas — a designated terror organization — to "play a role" in the future of the Palestinian people.

During his speech to the Muslim world in Cairo on Thursday, the U.S. president bluntly recognized the group, which has called for the destruction of Israel, in a two-sentence passage that was part of a broader discussion about the terms for peace between the Israelis and the Palestinians.

"Hamas does have support among some Palestinians, but they also have to recognize they have responsibilities. To play a role in fulfilling Palestinian aspirations, to unify the Palestinian people, Hamas must put an end to violence, recognize past agreements, recognize Israel’s right to exist," Obama said.

The president then called on Israel to end settlement construction and for both sides to embrace a two-state solution. He reiterated that the U.S. bond with Israel is "unbreakable."

Some observers said they were struck by the firm tone Obama took with both sides in addressing the generations-old conflict and particularly with his recognition of Hamas, which may signal to the group that it is seen as an inevitable part of the Palestinian future.

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Jim Sinclair’s Commentary

It is high stakes poker that our leaders play.

It should be quite apparent now what "Israel makes a significant miscalculation," means.

Obama shifts tone toward Islamic parties

President Obama hinted Thursday that the United States would for the first time accept the results of Middle East elections won by Islamist parties.

In contrast to the Bush administration, which boycotted groups such as Hamas and Hezbollah even after they performed well in elections, Mr. Obama said, "America respects the right of all peaceful and law-abiding voices to be heard around the world, even if we disagree with them. And we will welcome all elected, peaceful governments — provided they govern with respect for all their people."

Those words carry particular significance because on June 7 Lebanon is expected to hold an election where Hezbollah, an Iran-backed group, could win a plurality of votes.

It was also a message to the Egyptian Muslim Brotherhood, whose members running as independents won 88 seats — 20 percent of the Egyptian national assembly — in 2005 despite widespread cheating on behalf of the government.

Several members of the group were in the audience at Cairo University as the president spoke. Egypt holds new parliamentary elections next year.

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Jim Sinclair’s Commentary

First, China/Brazil and now China/Russia. The dollar rally is going to run into real problems.

The set up is perfect: The 2nd week of June coming up with a target for the big lift off in the 3rd.

$1650 is a minimum for this phase. Alf thinks an overrun could be double that.

Good luck to the Goons. Their window of opportunity, if the Goons have one, is in the next 2 weeks ONLY.

Russia, China should dump dollar in trade – Medvedev
Fri Jun 5, 2009 3:07pm IST

MOSCOW (Reuters) – Russia and China should consider switching to domestic currencies in bilateral trade without going to the dollar, Russia’s president Dmitry Medvedev said in an interview with Kommersant daily published on Friday.

China has already entered similar agreements with Brazil and Belarus. The deal involves a currency swap agreement between the two countries. Trade turnover between Russia and China reached about $50 billion in 2008 and is set to increase.

"I think that we can think about such positions, for example the rouble against yuan," Medvedev was quoted by Kommersant as saying. Russia’s own attempt to switch to the rouble in bilateral trade with Belarus has so far not been successful.

Leaders of Brazil, Russia, India and China, known by their BRIC acronym, are meeting in the Russian city of Yekaterinburg on June 16 to discuss the role of the dollar in the global financial system among other issues.

Medvedev said bilateral currency deals between trade partners ease impact of the economic crisis in an environment when many countries have difficulties tapping international capital markets.

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Posted at 2:43 PM (CST) by & filed under Jim's Mailbox.

Dear CIGAs,

In case you are interested in how SPIN is SPUN and a crowded short USD corner is run into cover…

Jim,

Jobless rate hits 9.4 percent in May; layoffs slow
Jobless rate jumps to 9.4 percent in May, even as layoffs slow to 345,000
–Jeannine Aversa, AP Economics Writer

Click here to read the article…

"But the pace of layoffs eased, with employers cutting 345,000 jobs, the fewest since September."

The equity traders jumped all over this tidbit. Did I hear someone scream "Green shoot?" Listen, same data (crap), different month. The birth/death model continues to distort the payroll numbers by showing aggressive job creation from non-traditional job sources. This extend of this distortion is revealed in the following graph.

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Over 6000 jobs have been lost since 2009.01. Yet, despite this job loss from tradition employers, the birth/death model suggests that 1341 non-traditional jobs have been created over the same period. This is 3 times the average birth/death model contribution since 2004. Call me skeptical, but the current run rate of 1341 seems not only distortional but a tad coincidental.

For further review of how the birth/death model creates (but rarely destroys jobs) see

http://www.bls.gov/web/cesbd.htm

Regards,
CIGA Eric

 

Jim Sinclair’s Commentary

Don’t let the goons get you down. Gold is going to $1650 before moving on to Alf’s numbers.

The US dollar will not survive the winter intact.

"In life there are always undesirable things. Perhaps we can feel better about ourselves if we realize just how good we have it.

I hope this message will bring fresh new ways of thinking to everyone and that everyone can appreciate and be thankful for each beautiful day that follows. Faith is the continual demonstration of the Strength of Life."

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Posted at 1:54 PM (CST) by & filed under General Editorial.

Dear CIGAs,

The investment world has always been made up of three categories:

1. Builders of enterprises.
2. Destroyers of enterprises and all they touch.
3. Shufflers of paper.

From 1945 to 1985 there were more builders than destroyers with the same number of paper shufflers

Today the population is primarily if not almost totally made up of:

1. Destroyers.
2. Paper shufflers who are also destroyers (OTC derivative manufacturers and distributors).

Who out there is really dedicated to building an enterprise? The answer is very few, and when they are they have to beat their way past the Destroyers and Paper Shufflers.

For gold shares the paper shufflers and destroyers work via a mechanism called a PIPE. When a resource company hears the word PIPE they should not walk away, they should run away as fast as they can.

An important characteristic about a PIPE is that it provides money in tranches only. Generally the tranches are the total required divided by the time to complete the project being financed.

Pipes work this way. The Hedge fund agrees with the company to provide lets say $25,000,000 over one or two years. Please note that the financing entity has the right to walk away at any time. The financing entity insists on getting shares that are immediately saleable.

Upon agreement the financing entity initiates a short position because the price of the shares delivered will be the price of the shares as it is trading on the day of the company’s request for money, less 15%. They generally are short more than the monthly delivery tranche. This device specializes in raping small caps.

A PIPE arrangement via its mechanism and the financier’s short position guarantees the short (financing entity) a profit of 15% or more if you can batter the price down, which of course the financing entity does.

To accept a PIPE financing is to offer up your shareholders as sacrificial lambs which many companies find irresistible in hard times. It puts the company into the hands of Jabba the Hut, PIPE financiers who will pull the money plug at some critical moment leaving the dumb company to fold.

In knowledge that they have tanked the company, the Jabba the Hut PIPE financiers of course pummels the share values into oblivion without risk.

This is how a company goes down a PIPE into a Rat Hole.

A PIPE financing is the ultimate set up that hunts, as a top predictor, for the weak and stupid small cap anything. Investors and companies BEWARE!

You should warn your investment management not to participate in this type of financing, or at least understand what has happened so you can get out of Dodge before the PIPE financing entity kills the company.

Posted at 11:14 AM (CST) by & filed under General Editorial.

Dear CIGAs,

To answer the multiple calls this morning please re-read this posting from last evening:

"The commercial interests are still not ready for this. For the commercial interest to either miss this move or be buried by it is a reach. It could happen, but is unlikely to happen without a fight. We will be watching closely to call it for you.

In truth the best possible action would be for gold to decline from some level into the third week of this month and then launch forward. However, to those utilizing gold to insure their standard of living and life it makes no difference at all. The reason for that is gold is going to $1650 and then on to Alf’s numbers."

1. The commercials will do everything possible when any opportunity arises to bang gold in order to reposition for the most dynamic move in gold since $248 on the upside.

2. The dollar rally on the jobs report is a weak handed short being bamboozled by a massaged number which if closely examined and understood in terms of its volatility is ABSOLUTELY not a long term trend maker.

Nothing whatsoever has changed in any way except the pituitary output and serotonin level of the gambleholics many of you have become.

Those that call me more than five times in one day even if they feel positively motivated are actually trying to test my resolve.

I posted late last night because I actually have many other things than JSMineset to do. I slept late this morning because I wanted some rest. The gold market got COMEXED and many of you, truth be known, panicked and called not to check on me but rather to check on your position when there is nothing whatsoever to be concerned about outside of your own emotions.

I plan to spend this weekend with my daughter, her dogs and a 14 foot boat on a quiet lake. I suggest you all make similar efforts to relax and enjoy life because there is nothing to be concerned about in Gold or anything Gold related.

Respectfully yours,
Jim